Technology

Missed Out on NVIDIA's Run-Up? This Is the Best "Magnificent 7" Stock To Buy Now

John Seetoo

Published: August 15, 2024 10:54 am

Meta Platforms

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• Meta Platforms is the second best Magnificent Seven performing stock in 2024 to date after Nvidia .
• Meta Platforms has committed up to $40 billion CapEx for 2024 dedicated to R&D to expand its AI capabilities.
• Early AI functions show promise, and Meta’s 2Q 2024 financials blew away analysts’ forecasts.
• If you looking for the best performing AI stocks, you absolutely need to grab a copy of our brand-new “The Next NVIDIA” report. It discusses the push from AI clusters with thousands of GPUs to more than a million and the kinds of stocks that could become massive winners in this next shift in the AI space.

The tech based “Magnificent Seven” stocks are: Alphabet (NASDAQ: GOOG), Amazon (NASDAQ: AMZN),  Apple (NASDAQ: AAPL), Meta Platforms (NASDAQ: META), Microsoft (NASDAQ: MSFT), Nvidia (NASDAQ: NVDA), and Tesla (NASDAQ: TSLA). Their combined market capitalizations, which are easily in the trillions, are so large that they wield significant market index clout with the S&P 500, NASDAQ composite, and others. 

Due to its 2024 performance, Nvidia has unquestionably been the Magnificent Seven pack leader. However, sustaining such a bull run over a half year defies the law of averages. Given that a significant amount of tech development overlaps, it stands to reason that some of the other Magnificent Seven stocks may be due for a breakout bull run turn. 

After Nvidia, Meta Platforms comes in next for 2024, with a +44.9% gain in the same period, from January to mid-July. Meta Platforms is best known for its ubiquitous social media platforms, i.e., Facebook, Messenger, Instagram, and WhatsApp. The company’s prospects for the rest of 2024 are looking especially strong, and a case can be made that Meta’s turn for a bull run is imminent.

Meta’s AI – Wave Of The Future?

Meta has been pouring huge amounts of money into its AI research and development department. Its goal is to embed AI in Facebook, Instagram, Messenger, and WhatsApp to optimize  maximum marketing and advertising revenues. Meta’s AI has already been implemented at a fundamental search and inquiry level. Analyst Josh Beck of Raymond James was quoted, “There’s starting to be a new conversation on Meta, that you would’ve really never considered before.” He detailed how Meta’s AI enables users to ask questions and interact more deeply than ever before on their platforms. Searches on Facebook now get AI summaries and comparison options, for example. 

Spending Money To Make Money

CEO Mark Zuckerberg is unafraid to spend on R&D, as his previous forays into cryptocurrency and virtual reality have demonstrated. Meta’s CFO, Susan Li, recently gave guidance that the company’s overall 2024 CapEx will be $37-40 billion. She alluded to 2025’s CapEx possibly even exceeding that amount. Llama 3.1, which is Meta’s open-source AI model, is anticipated to be a primary beneficiary of these funds. With increased AI access to Llama 3.1, it is strategizing  to compete heavily with ChatGPT, Grok, and other AI platforms in the market.

Analysts don’t appear to be fazed by the huge sum, since Beck, for example, praised Meta’s “disciplined investment philosophy”. Meta’s guidance of $39.1 billion in Q3 sales should also help to quell any other financial worries  The AI benefits are already contributing to tangible results, if Meta’s Q2 results are any indication.

Meta posted revenue of $39.07 billion, a $7 billion year over year increase. Earnings per share of $5.16, which was $760 million higher than the average analyst estimate and exceeded the consensus profit target by $0.40 per share. Sales increased nearly 22% year over year; per-share profits were up 73%. Engagement and monetization from Meta’s services showed strong upward trajectories.

Between Facebook, Instagram, and WhatsApp, daily active user traffic expanded to 3.27 billion, which was a 7% year over year increase. The Meta Family of Apps cumulatively generated $1 billion more than analysts’ target.  Advertising price per ad and ad impressions also increased by 10% in the same time span.

Meta Platforms’ efforts to maintain its edge and decision to go all-in with AI may be the key to the next Magnificent Seven bull run. After dropping almost 90 points in early June from a 2024 high, the price has already returned past the halfway mark, and is still going strong.  The increasing prospects of a Fed Rate cut from Chairman Jerome Powell is also fueling the buying of Meta stock. The company’s daily usage traffic is also likely to get a boost as Autumn begins later this year.